Traditionally the calibration equation for pyranometers assumes that the measured solar irradiance is solely proportional to the thermopile's output voltage; therefore only a single calibration factor is derived. This causes additional measurement uncertainties because it does not capture sufficient information to correctly account for a pyranometer's thermal effect. In our updated calibration equation, temperatures from the pyranometer's dome and case are incorporated to describe the instrument's thermal behavior, and a new set of calibration constants are determined, thereby reducing measurement uncertainties. In this paper, we demonstrate why a pyranometer's uncertainty using the traditional calibration equation is always larger than a-few-percent, but with the new approach can become much less than 1% after the thermal issue is resolved. The highlighted calibration results are based on NIST-traceable light sources under controlled laboratory conditions. The significance of the new approach lends itself to not only avoiding the uncertainty caused by a pyranometer's thermal effect but also the opportunity to better isolate and characterize other instrumental artifacts, such as angular response and non-linearity of the thermopile, to further reduce additional uncertainties. We also discuss some of the implications, including an example of how the thermal issue can potentially impact climate studies by evaluating aerosol's direct-radiative effect using field measurements with and without considering the pyranometer's thermal effect. The results of radiative transfer model simulation show that a pyranometer's thermal effect on solar irradiance measurements at the surface can be translated into a significant alteration of the calculated distribution of solar energy inside the column atmosphere.